Posted by David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer

In June we announced an advertising agreement with Yahoo! that gave Yahoo! the option of using Google to provide ads on its websites (and its publisher partners' sites) in the U.S. and Canada. At the same time, both companies agreed to delay implementation of the agreement to give regulators the chance to review it. While this wasn't legally necessary, we thought it was the right thing to do because Google and Yahoo! have been successful in online advertising and we realized that any cooperation between us would attract attention.

We feel that the agreement would have been good for publishers, advertisers, and users - as well, of course, for Yahoo! and Google. Why? Because it would have allowed Yahoo! (and its existing publisher partners) to show more relevant ads for queries that currently generate few or no advertisements. Better ads are more useful for users, more efficient for advertisers, and more valuable for publishers.

However, after four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long term interests of Google or our users, so we have decided to end the agreement.

We're of course disappointed that this deal won't be moving ahead. But we're not going to let the prospect of a lengthy legal battle distract us from our core mission. That would be like trying to drive down the road of innovation with the parking brake on. Google's continued success depends on staying focused on what we do best: creating useful products for our users and partners.

4 comments
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In response to problogger, i have heard that among various reasons the deal is called off...one is that the regulators wanted Google to reveal more than they wanted to about the technology/business and future plans of the company.

So Google, after heavily backing Obama, is stepping up its lobby push.I think one of the saddest casualties of the state is the innovative spirit. It is really depressing to watch market revolutionaries like Google--who achieved its glory through true service to the neighbors--deformed into mobsters and power brokers by the state. I think of the following Mises quotes:

"The member of a contractual society is free because he serves others only in serving himself. What restrains him is only the inevitable natural phenomenon of scarcity."

"The development of capitalism consists in everyone having the right to serve the consumer better and/or more cheaply."

With Google's disgraceful push for so-called Net-Neutrality they are not only attempting to block competitors but to externalize massive operation costs onto the consumer by preventing telecom companies from charging Google for the bandwidth it uses. If they can successfully push this policy through, what's a couple million in tribute to Obama?

The state truly reverses the order of liberty: no longer is it innovation, perception, hard work and diligent service that are rewarded, but rather loyalty to those in power and nothing else.

Bill, I don't know where you've been, but allowing ISPs to slow traffic to certain sites, regardless of how big or small those sites are, is dangerous. Users should be able to freely access whatever information they want to, and if many people access Google's site, Google should only have to pay for its own bandwidth, not extra charges imposed by ISPs (or, at least, have connection to its site slowed). In the end, it will hurt the users if ISPs can selectively slow or block certain sites.